Municipal and school district audits released during the week ending January 9, 2021

New York State Comptroller Thomas P. DiNapoli announced that the following local government and school district audits were issued during the week ending January 9, 2021.

Click on the text highlighted in color to access the complete audit report

Local Government Audits

Citizens Hose Company – Board Oversight of Financial Operations (Ontario County) Auditors determined Citizens Hose Company did not have adequate controls in place to ensure that company funds were safeguarded. The company’s bylaws were insufficient because they did not provide detailed guidance for the treasurer or audit committee when collecting and depositing funds, recording cash receipts and disbursements and paying company bills. In addition, the treasurer misappropriated more than $20,000 of company funds. The company secretary also inappropriately used a company credit card for personal purchases of at least $1,100 without detection by officials. As a result of the audit, the former Citizens Hose Fire Company treasurer, pleaded guilty to felony grand larceny and was ordered to repay restitution.

City of Gloversville – City Clerk (Fulton County)Auditors found the former clerk did not properly account for fees. The former clerk waived fees for 249 certified copies of birth certificates totaling $2,490 without a valid reason. The former clerk also did not deposit all fees intact and substituted checks and money orders for cash collections. Auditors did determine that the current clerk was acting properly and accounting for fees as of Oct.1, 2017.

Ethics Oversight (Statewide Unit) This multi-unit audit included 20 individual audits including: 8 Counties: Albany, Chautauqua, Chemung, Genesee, St. Lawrence, Steuben, Suffolk and Tompkins; 8 Towns: Clay, Colonie, Greece, Oyster Bay, Ramapo, Southampton, Tonawanda and Union; and 4 Cities: New Rochelle, Rochester, Troy and Utica. Local governments must comply with New York State General Municipal Law (GML) and should do more to ensure proper ethics oversight.

Oneida-Herkimer-Madison Board of Cooperative Services (Oneida County, Herkimer County and Madison County) Oneida-Herkimer-Madison Board of Cooperative Educational Services (BOCES) officials did not regularly provide formalized information technology (IT) security awareness training. BOCES officials also did not assess computer usage to confirm IT assets were used for appropriate purposes or establish adequate controls to safeguard information contained in the network and financial system. Personal internet use was found on computers. In addition, network and application user accounts were not properly managed. Auditors also determined no disaster recovery plan was developed. Sensitive IT control weaknesses were communicated confidentially to BOCES officials.

Village of Monticello – Financial Condition (Sullivan County) The board did not adequately manage the village’s financial condition. As a result, the village is fiscally stressed. Auditors determined the village’s total fund balance will likely be fully depleted at the end of the 2019-20 fiscal year. The village also has exhausted nearly 100 percent of its constitutional tax limit. In addition, the village has significant infrastructure needs that it lacks the funds to address.

Village of Monticello – Records and Reports (Sullivan County) Auditors determined the treasurer did not maintain accurate, complete and timely accounting records or properly reconcile bank accounts in a timely manner. About $5 million of real property tax revenue was not posted to the accounting records. Bank reconciliations were generally performed two to three months after the statement date. In addition, periodic financial reports were not prepared for the board of trustees or department heads. Annual Update Documents, which are required annual financial reports, constitutional tax limit forms and adopted budgets were not filed in a timely manner, with some filed typically over 200 days late.

School DistrictAudits

Alexandria Central School District – Financial Condition Management (Jefferson County and St. Lawrence County) The district’s budgeted appropriations from 2016-17 through 2018-19 exceeded actual expenditures by $844,261, or 6.4 percent and the district did not need to use most of the appropriated fund balance for operations. The surplus fund balance in the general fund exceeded the 4 percent statutory limit for the past three fiscal years. As of June 30, 2019, surplus fund balance was $1.75 million, or 12.8 percent of the next year’s budget. In addition, district officials have not developed a long-term financial plan or a comprehensive reserve fund policy. Officials also did not implement the recommendations in a prior audit released in March 2016. This audit contains similar findings and recommendations.

Prattsburgh Central School District – Financial Management (Steuben County and Yates County) The board and district officials’ actions to manage financial condition were not transparent and more taxes were levied than necessary to fund operations. The board also appropriated fund balance totaling $1.13 million for fiscal years 2016-17 through 2018-19 but none of the money was used or needed to fund operations. For the last three fiscal years, the district reported that it exceeded the 4 percent statutory surplus fund balance limit, however when unused appropriated fund balance is added back, surplus fund balance exceeded the limit between 11 and 15 percentage points. In addition, the board did not develop written multiyear financial and capital plans.

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When the statutory language is clear and unambiguous, it should be construed so as to give effect to the plain meaning of the words used

This CPLR Article 78 was filed by an individual [Plaintiff] who was initially employed by New York City Health and Hospitals Corporation and subsequently was appointed as a correction officer by the New York City Department of Correction [DOC].

At the time of his appointment by DOC Plaintiff was a "Tier 4 member" of  the New York City Employees' Retirement System [NYCERS]and DOC requested that the NYCERS to place the Plaintiff in the City's CF-20 plan in Tier 3. DOC's request was approved,

Subsequently Plaintiff asked NYCERS about his member status in the System. NYCERS advised him that it had conducted a review of his membership status and had determined that his current retirement plan, CF-20, was incorrect. NYCERS told Plaintiff that it was mandated by law to place him in the Uniformed Correction Force 22 year plan [CF-22]. 

Contending that NYCERS's determination changing Plaintiff's pension benefit plan from CF-20 to CF-22 was arbitrary and capricious, Plaintiff asked Supreme Court to compel NYCERS to reinstate him as a CF-20 Plan member. Supreme Court denied Plaintiff's petition and he appealed the court's ruling.

The Appellate Division sustained Supreme Court's decision, explaining:

1. "NYCERS is the public employee retirement system responsible for administering the retirement programs for employees of the City [of New York] and various [New York] City-related participating employers."

2. Before the effective date of the 2012 amendment to the Retirement and Social Security Law [RSSL], any person who became employed as a uniformed correction officer was eligible to join the CF-20 plan in Tier 3 pursuant to RSSL §504-d as then in effect.

3. In March 2012, the Legislature amended certain provisions of the RSSL, the result of which Plaintiff would be ineligible for CF-20 benefits.

It is undisputed that, when the Plaintiff joined NYCERS in 2004, he joined as a Tier 4 member and was subject to RSSL Article 15 rather than the provisions of RSSL Article 14 until he was appointed as a correction officer.

Although the Appellate Division conceded the Plaintiff was correct that certain portions of the legislative history of the amendment indicate that the 2012 amendment would impact members who first become members of NYCERS on or after April 1, 2012, NYCERS successfully argued that the legislative history of the amendment stated that the relevant amendments would apply to new New York City uniformed correction members.

Citing People v Brown, 115 AD3d 155, affirmed 25 NY3d 247, the Appellate Division opined that the plain language of the RSSL §501(25) is clear and unambiguous. The court then indicated that "when the statutory language is clear and unambiguous, it should be construed so as to give effect to the plain meaning of the words used." 

Thus, the court concluded that Plaintiff did not become subject to Article 14 of the RSSL until after April 1, 2012, and NYCERS properly reclassified his retirement system member status from CF-20 to CF-22.

The court rejected Plaintiff's arguments that [1] Article V, §7 of the New York Constitution* and [2] the doctrine of equitable estoppel** barred NYCERS from changing his retirement system member status as NYCERS, itself, initially placed him in the CF-20 plan.

In the words of the Appellate Division, "[i]n securing a public employee's retirement rights, '[t]he Constitution does not, in terms or otherwise, preserve naked pension rights quarights but, rather, the benefits of the contractual relationship ... Thus, we must look to the contract for both the source and the definition of the plaintiff's benefits'".

Noting that Plaintiff became a member of NYCERS as a Tier 4 member subject to RSSL Article 15, the court concluded that "the 2012 amendments at issue in no way diminished or impaired [Plaintiff's]  pension benefits," and agreed with NYCERS that the 2012 amendments, as applied to Plaintiff, did not violate his rights under the Constitution's pension impairment clause.

* Article V, §7 of the New York Constitution, which states that "Membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired". 

** See, however, https://publicpersonnellaw.blogspot.com/2020/12/a-governmental-entity-may-be-subject-to.html, a decision by the Appellate Division that addressed an exception to this general rule.

Click here to access the text of the decision.

Click here to access another Appellate Division ruling involving similar issues as presented in this action handed down on the same day. 

 

 

Evaluating an individual's application for accidental disability retirement where a statutory presumption of causation is a factor

A New York City police officer [Plaintiff] filed an application for accidental disability retirement [ADR] benefits based on a heart condition. The Medical Board [Board] concluded that Plaintiff was disabled as a result of various heart ailments but recommended ordinary disability retirement [ODR]* because there was no evidence that Plaintiff had hypertension or any other stress-related heart problems. The Retirement System adopted the Board's recommendation.

Plaintiff filed a petition pursuant to CPLR Article 78 seeking a court order [1] vacating the Retirement System's determination denying Plaintiff 's application for ADR and [2] directing that he be granted retirement with accidental disability benefits. Supreme Court granted Plaintiff's petition and the Retirement System appealed.

The Appellate Division affirmed the Supreme Court's ruling, explaining that the lower court had properly granted the petition based on the presumption of causation set out in General Municipal Law §207-k.**

Conceding that there was some evidence that Plaintiff was diagnosed with "essential hypertension" prior to his retirement, the Appellate Division noted that most of the evidence related to hypertension post-dated his retirement.

Further, said the court, the Board did not express an opinion as to whether Plaintiff's other heart ailments, including his need for a dual chamber pacemaker were causally related to stress or other occupational factors and failed "to address Plaintiff's numerous heart problems and focused only on the absence of hypertension."

The Appellate Division then opined that the Retirement System "cannot deny ADR benefits in a case governed by General Municipal Law §207-k by relying solely on the absence of evidence tying the disability to work-related stress," citing Bitchatchi v Board of Trustees of N.Y. City Police Dept. Pension Fund, Art. II, 20 NY3d 268.

* Ordinary Disability Retirement benefits are typically less generous than Accidental Disability Retirement benefits.

** General Municipal Law §207-k sets out a rebuttable presumption that a  disability resulting from any condition of impairment of health caused by diseases of the heart suffered by an applicant for accidental disability retirement benefits was incurred in the performance and discharge of official duty unless the contrary is proven by competent evidence.

Click here to access the text of the decision.

 

Court vacates agency's grievance decision after finding it arbitrary and capricious and not rational under the circumstances presented

The Acting Director of Labor Relations [Director] of the New York State Unified Court System [UCS] denied a grievance filed by certain individuals [Plaintiffs] challenging the placement of the names of certain candidates on the promotion examination No. 55-787 eligible list for appointment to the title of Senior Court Reporter with UCS.

Plaintiffs filed a petition pursuant to CPLR Article 78 appealing the Director's decision and seeking a court order directing UCS:

[1] To remove from the eligible list for promotional examination No. 55-787 the names of candidates who were not employed in the Court Reporter title by the date of the examination; and

[2] To remove any candidate from the position of Senior Court Reporter appointed  from the promotional examination eligible list who did not meet the minimum qualifications to compete in the promotion examination.

Citing 22 NYCRR 25.13[k], Supreme Court "determined that the complained-of conduct by the UCS violated its own rules and eligibility requirements." Holding that such action "was arbitrary and capricious," the court granted Plaintiffs' petition. UCS appealed the Supreme Court's ruling.

The Appellate Division's decision notes that UCS had simultaneously administered an open-competitive examination and a promotional examination for the title of Senior Court Reporter, which examinations were substantively identical. Further, both examination announcements stated that the promotion list "will be used to make appointments before appointments are made from the list established from the open-competitive examination."

Separate eligible lists for each examination were established. However the names of 22 individuals who had taken the open-competitive examination appeared on both the competitive list and the promotion list, although none of these 22 individuals met the minimum qualifications to take the promotional examination and none had actually taken the promotional examination.

Also noted in the Appellate Division's decision was the fact that these 22 individuals "had been appointed as entry level Court Reporters after the examination but before the eligibility lists were established," and that a number of these 22 candidates "had scored higher than those who had taken the promotional examination."

Agreeing with the Supreme Court's determination that the UCS's placement of open-competitive candidates for the Senior Court Reporter position on the promotion list was arbitrary and capricious and not rational under the circumstances presented herein, the Appellate Division explained Article V, §6 of the New York State Constitution provides that "[a]ppointments and promotions in the civil service of the state and all of the civil divisions thereof, including cities and villages, shall be made according to merit and fitness to be ascertained, as far as practicable, by examination which, as far as practicable, shall be competitive."

Conceding that a civil service commission exercises wide discretion in determining the fitness of candidates, the Appellate Division observed that the exercise of such discretion is to be sustained unless it has clearly been abused  and a court, in determining a CPLR Article 78 petition, ''may not substitute its judgment for that of the agency responsible for making the determination and, as long as the administrative determination is not irrational or arbitrary and capricious, [the court] may not annul it."

Here, however, the Appellate Division agreed with the Supreme Court's finding that UCS's placement of the names of open-competitive candidates for the Senior Court Reporter position on the promotion list for that title was arbitrary and capricious and not rational under the circumstances presente and opined that UCS's conduct, among other things, "violated its own rules and eligibility requirements set forth in the exam announcements." It then sustained the Supreme Court's decision granting Plaintiffs' petition, with costs.

Click here to access the decision.